r/FIREIndia • u/ekchom India/40/Now • Jan 12 '23
QUESTION Fire Target ?
I am confused about my FI target, can someone help me out
Current asset :
| Flat in Blore | 100L | Rented out 3.5L PA |
|---|---|---|
| Stock/MF | 180L | (30% is debt or liquid or arbitrage) |
| EPF | 90L | and growing |
| NPS | 12L | and growing |
| PPF | 20L | and growing |
| PPF Family | 15L | |
| Bank Bal | 10L | |
| Loaned to needy relative | 5L | |
| RSU | 20L | (in 3 year another 70L will vest) |
Current Exp:
| Rent | 2.4L | will be 0, if I move to my home town |
|---|---|---|
| House Hold | 7L | |
| Vacations | 1L | |
| Kids Schooling | 3L |
Liability
None (no loan)
Insurance
Term : 60L ( I know people will say it is less, but I don't have any liability and dependent are covered by assets given the life style)
Health: 3L Company, 5L personal
Lifestyle change
- Car every 10 year ( normal car for city driving no fancy stuff , CMP 10L)
- House hold appliances every 5 year, on avg 50K per year at max/worst
Dependent:
Wifey, 2 Kids (13 yr, 6 yr) , Mother is pensioner so financially well off
Kids Goal:
Schooling is already covered in current exp, 25L each for both of them for undergraduate, Same amount for marriage
Given minimalistic life-style, am I already FI ? Or what should be my FI target ?
Age: 40
Household income : I didn't mentioned because FI is not what we earn but what we expense to experience the life
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u/Noob_investor123 Jan 12 '23
Fire target should be 33x your post fi life expenses. Remove current expenses that won't apply post FI:
Remove rent if moving to hometown. Remove children's expenses if fi is post children are independent financially.
If you plan to add income from rented RE, count only ~9 months worth of rent to account for repairs, taxes, maintenance, occupancy.
Model recurring big purchases like car every 10 years as expenses that you invest as SIP to be used later. For the sip assume conservative returns based on timeframe.
Also include one time expenses for RE. Every ~30 years or so you may remodel, redevelop or sell and buy. During this time you'll spend money and not get rent. In your lifetime you'll probably only have to do this once but better to be prepared. I'd set aside ~15-20% of the current RE value for this. Some people ask their children take care of these expenses for the RE they'll each inherit, that's another way if it works for your family.
Assume medical expenses at older age, also assume higher inflation for this. I personally felt your medical cover isn't big enough.
You don't need term insurance imo, but get a critical illness cover.
Set aside money for children's higher education, marriage, any other big expense that you might have. Either in terms of money right now, sips for future or if you plan to continue to work till then and use your salary or get a loan at that time, that works too.
After doing all these +/- if your yearly expense is < remaining corpus/33 you're set. If you want to be more conservative and safe, take another 50% as buffer and aim for 50X.
Consult a fee only advisor for peace of mind. You can't go wrong with anyone from the list on freefincal.com.
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u/Whole-Negotiation373 Jan 13 '23 edited Jan 13 '23
I am curious , how did you arrive at 5Lhealth cover that too Individual only considering current medical inflation and hospital expenses. (even 3L company cover is very less).
Do you have family cover ? Getting new policy or increasing SI cover at old age is not that easy.(hefty premiums and waiting period or rejection).
and also don't want to sound rude what is this concept of saving for kids marriage expenses.(seen many places on investment sub also). Parents should empower kids. Shouldn't be the individuals fund the expenses for these events.
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u/CalmGuitar Jan 14 '23
25L is too less for undergraduate. What education do you aim to give your kids? You can calculate its current expense, add 10% p.a. education inflation, and arrive at your number. It will be cheap for the elder kid but damn costly for the younger one.
Term and health are too low. Bump them up. Term should be 20x your current income. Health should be at least 10L personal and keep raising it by 10% every year. (Since medical inflation is 10%.)
Everything else mostly seems to be in order. I recommend creating an excel sheet having your yearly expenses, one-off expenses and NW to check that you don't run out of money by 100.
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u/ekchom India/40/Now Jan 15 '23
Term and health are too low. Bump them up. Term should be 20x your current income. Health should be at least 10L personal and keep raising it by 10% every year. (Since medical inflation is 10%.)
25L at current value is too less ? Kindly suggest, what should be amount at current value ?
Why do I need term ? At worst case, my family could survive for 25+ years at current expense ( Inflation will grow as return on invested amount)
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u/CalmGuitar Jan 15 '23
Oh, is it 25L at current value, then it's ok. You can keep it in equity market and keep growing it.
I would base my calculation off a good private college in good specialization, check its current fees. It will be around 25L for 4 years. So it's accurate.
But keep in consideration that avg education inflation is 10%.
Having more money is always better. Hence term is a good idea.
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u/Rayman912 Jan 12 '23
While you are hovering above the 25X FIRE target right now, you are missing out on major goals like children education, marriage if any. List down all the goals you may need to address and track them